Canadian Shipper November + December 2018

NOVEMBER 2018

PUBLISHED SINCE 1898 | WRITTEN F

RS OF TRANSPORTATION SERVICES

2019 OUTLOOK Shipper-carrier collaboration

SURFACE TRANSPORT National oversize load corridor?

LET'S DO THIS AGREEMENT 40063170

SERGE CARESTIA AND HIS TEAM AT HOME DEPOT CANADA HAVE BUILT A WINNING SUPPLY CHAIN

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CONTENTS

NOVEMBER 2018

DEPARTMENTS

10

5 | Editor’s Foreword Don’t sign it

COVER STORY

6 | In the news USMCA welcomed by the transportation industry; Opportunity discussed at Halifax Port Days; St. Lawrence Shipoperators hear about autonomous vessels

LET'S DO THIS

33 | Inside the Numbers Freight frenzy

Meet Serge Carestia and the supply chain group at The Home Depot Canada.

35 | Coaching Corner The gig economy

38 | The Bigger Picture Celebrating 10 years of the STS

Photo: Roger Yip

24 SURFACE TRANSPORT The concept of a national oversize load corridor may be finally catching on

The Home Depot Canada team (clockwise from bottom): Serge Carestia, vice president, supply chain; Victoria Toll, director, transportation; Arman Mirza, director, capacity and ops planning; Rheanne Kett, director, finance, supply chain and merchandising operations; Ian Gilbart, director, distribution; Chris Budgen, director, inventory planning and replenishment; Mark Gallant, senior director, supply chain direct fulfillment; and Azadeh Hashemi, director, DF, strategy.

FEATURES 2019 OUTLOOK | 14 Shippers and carriers discuss the future of the transportation supply chain

28

2019 3PL STUDY | 23 Annual survey highlights supply chain technologies

WEST COAST GATEWAYS | 28 Port of Vancouver: Facilitating Canada’s trade; Making Vancouver a leading maritime centre

© iStock

www.canadianshipper.com November 2018 3

VERSACOLD

Vera Penney Shunter 10 years, VersaCold

VersaCold is a food-first company. With over 70 years of supply chain experience, we’re a diverse team dedicated to ensuring the safety, quality and freshness of the food families eat—every step of the chain.

versacold.com

EDITOR'S FOREWORD John Tenpenny November 2018 Volume 121 Issue No. 6

EDITOR John Tenpenny (416) 510-6880 john@newcom.ca MANAGING DIRECTOR, TRUCKING AND SUPPLY CHAIN GROUP Lou Smyrlis lou@newcom.ca

Don’t sign on the dotted line

ART DIRECTOR Elaine Borg CONTRIBUTORS Carolina M. Billings, Mark Cardwell, Dan Goodwill, Carroll McCormick, James Menzies, Ian Putzger, Leo Ryan, John G. Smith, Roger Yip PRODUCTION MANAGER Kimberly Collins (416) 510-6779 kim@newcom.ca DIRECTOR, BUSINESS DEVELOPMENT Delon Rashid (416) 459-0063 delon@newcom.ca REGIONAL ACCOUNT MANAGER Anthony Buttino (416) 458-0103 anthonyb@newcom.ca WESTERN EDITOR Derek Clouthier (403) 969-1506 derek@newcom.ca CIRCULATION MANAGER Mary Garufi (416) 614-5831 mary@newcom.ca PRESIDENT Joe Glionna CHAIRMAN & FOUNDER Jim Glionna

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T

he wait is finally over. After nearly two years of negotiations, deadlines and missed deadlines and Tweets, oh the Tweets, the governments of the North American continent finally signed off on a new tri-lateral trade agreement to replace NAFTA. The acronym-less United States-Mexico-Canada Agreement (USMCA), has some new wrinkles when compared to its predecessor, such as opening Canada’s dairy industry to more U.S. competition and an increased de minimis for mostly online shoppers, but it’s what isn’t in the agreement that is more revealing.

One of President Trump’s biggest sticks in trying to beat a deal out his adversaries was his threat and use of tariffs. He joked that the deal wouldn’t have been made without tariffs, specifically on Canadian-made steel and aluminum, which prompted titfor-tat retaliatory tariffs from Canada on a number of U.S. goods.

And as negotiations dragged on, Trump threatened to slap Canada’s auto industry with significant tariffs—a threat that now appears avoided. The deal says the first 2.6 million Canadian autos exported to the U.S. will be exempted from tariffs, a figure well above the current export rate of 1.8 million. But the steel tariffs remain in place and Trump has given no indication when he might lift them.

If we sign off on this deal then these tariffs become a Sword of Damocles hanging over our heads that we may never be able to get out from under. If past history is any indication, Trump may simply replace steel and aluminum tariffs with more on other products he deems important to national security.

With no guarantee as to the fate of the current tariffs the federal government’s stance should be to withhold its signature from the new North American free trade deal while American steel and aluminum tariffs remain in place on Canadian exports.

We should only sign the USMCA if the illegal trade tariffs are lifted once and for all.

Making this deal without that proviso is to sentence ourselves to unending attempts from the Trump administration to dictate trade terms—deal or no deal. As we know all too well, what comes out of his mouth, or smartphone, isn’t always the most reliable information available.

In singing the praises of the deal, Trump boasted—on Twitter of course—that “It is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!”

Why wouldn’t we take him at his word? CS

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IN THE NEWS

NAFTA 2.0: Long negotiations finally conclude with tri-lateral trade agreement Trucking, shipping groups dig into USMCA changes Whether you call it USMCA or the unofficial brand of NAFTA 2.0, North America’s new trade agreement is being greeted with a sigh of relief by transportation industry lobbyists and analysts alike.

“We were surprised that we were actually able to get the agreement since we heard there were issues,” says Jed Mandel, president of the Truck and Engine Manufacturers Association. “It was pretty last-minute.”

Trade negotiators had been at the bargaining table since August 2017, but it was only at the 11th hour before a U.S.-imposed deadline that a deal including Canada was secured. Now the details of the U.S.-Canada-Mexico Agreement (USMCA) need to be ratified by the governments involved.

Chris Brady, a New-York based analyst and the principal for Commercial Motor Vehicle Consulting, says NAFTA’s outright cancellation—threatened on occasion by U.S. President Donald Trump—would have been disastrous.

“It’s not substantially different from the current deal,” he says. “It’s not a major restructuring of NAFTA, which is good.”

But there are differences. Business groups continue to dig into the details and participate in conference calls with Global Affairs Canada to determine exactly what has changed in terms of the supply chain.

“The government of Canada delivered the best deal possible. Now it’s up to the supply chain to take some time to understand what this deal means,” said Canadian Trucking Alliance (CTA) president Stephen Laskowski.

There’s no question that free trade makes a difference in the business of cross-border trucking, affecting everything from freight volumes to the sourcing of components for trucks.

The freight rolling between Canada and the U.S. was valued at $582.4 billion between 2016 and 2017, according to the U.S. Department of Transportation.

6 November 2018 www.canadianshipper.com

By John G. Smith

The Ambassador Bridge, which spans Windsor-Detroit sees much of the freight rolling between Canada and the U.S., valued at $582.4 billion between 2016 and 2017.

In 2017, trucks carried half the $300 billion of goods traveling to the U.S. from Canada, and 65.7 per cent of the $282.5 billion of goods that were bound for this side of the border.

Commitments to streamline

The USMCA text includes commitments to streamline the way goods are moved across the border. Each country, for example, commits to using information technology that expedites procedures followed when releasing goods.

There’s also the pledge to coordinate procedures at adjacent ports of entry where specific facilities or examinations are needed to process the freight.

An initial review by the Canadian Trucking Alliance has identified potential revisions to the temporary admission of goods as it relates to in-transit moves, changes to promote electronic submissions, and potential shifts in warehousing rules.

Each country is committing to establishing a “single window” for electronic submissions of documents and data, it adds. There may even be changes to the administration of customs penalties—including how they are im-

posed, or the way “clerical” or “minor” errors are treated.

Text in the agreement includes further commits to facilitate trade using programs designed to improve the movement of goods through a port of entry—and if possible aligning hours of service, joint customs inspections, and shared facilities, the alliance says.

Tariffs remain

Still, 25 per cent tariffs on steel and 10 per cent tariffs on aluminum remain, and those have been pushing the price of things like specialty trailers higher.

“The steel and aluminum tariffs are still in effect and apparently are under negotiations. This is still a very troublesome issue and we are very concerned as we have indicated in the past,” says Don Moore, director, government and industry relations for the Canadian Transportation Equipment Association.

“We need the tariffs to be removed as soon as possible, particularly with our membership being largely small- and medium-sized entities who are large users of steel and aluminum.”

Other changes could affect freight volumes and lanes, depending on the ©iStock

IN THE NEWS

type of business being secured. Those who deal with express shipments, for example, could benefit from higher “de minimis” standards that allow Canadians to spend $150 online before any duties are applied. The limit had been sitting at a mere $20.

“The general feeling was any increase in de minimis values would drive e-commerce,” says Ruth Snowden, executive director of the Canadian International

Freight Forwarders Association (CIFFA), also noting how HST doesn’t apply until a $40 limit is reached.

“Anything that I think reduces the barriers to transportation, freight transportation, is good, and there doesn’t seem to be anything in this new agreement that raises any problems,” says Robert Ballantyne, president of the Freight Management Association of Canada. But from what he’s seen so far,

many changes affect things like intellectual property and the rights for those who hold drug patents. Those are unlikely to affect freight volumes.

“The fact there is an agreement in place, that is good. And that means things will continue pretty much as they have under NAFTA,” he says, “and I think NAFTA’s been a huge success in terms of the growth of trade, which has been a pretty widespread benefit.” CS

Ocean of opportunity Trade growth in the digital age theme of annual Halifax Port Days 2018 The re-election of Donald Trump to a second term as U.S. President would lead to continued trade instability between Canada and the United States, says trade expert Laura Dawson.

In an interview following her keynote address at Halifax Port Days, Dawson, the director of the Wilson Center’s Canada Institute, in Washington, D.C. and one of the world’s leading experts on political and economic relations between Canada and the U.S., said “He [Trump] is a very capricious actor on economic policy. Canada is going to have to be much more resilient than it has been in the past. Traditionally the U.S. has been a very secure, accessible and comfortable market for Canada and now with the volatility we have seen in the first term of Trump as President, I think some of that volatility will carry on even with the presence of NAFTA [now USMCA]. The President’s intention to continue to use these 232 national security tariffs [on steel and aluminum] is going to leave Canada in a vulnerable position.”

Dawson, founder of Dawson Strategic, an economic research and consulting firm and a senior advisor on economic affairs at the U.S. Embassy in Ottawa, said while the American economy is going strong with the aid of Trump’s tax cuts, she doubts that strong economy is sustainable.

“So many of the policies that are affecting our two economies are built on temporary measures that can’t be susPhoto: Halifax Port Authority

Trade expert Laura Dawson was the keynote speaker at the annual Halifax Port Days event.

tained,” she said. “I think tax reform is going to be very damaging to the U.S. in the long term. I’m not that kind of an economist but many of these policies are built on shifting sand,” she added.

Digital collaboration

During a business panel session, digitization in the shipping industry was the focus of the discussion.

A new collaboration between Maersk and IBM has produced a program called TradeLens. The goal of TradeLens is to develop a highly secure, digital ledger system that promotes the sharing of information across the global shipping industry which can reduce costs, improve productivity, increase the speed of the delivery of goods and provide transparency. The Maersk-IBM Blockchain will provide safety and security for the digital platform.

Michael White, CEO and head of TradeLens (Maersk GTD Inc.), said there are a lot of inefficiencies in the

By Tom Peters

complex global supply chain. “It needs a change to be more efficient,” he said, adding that blockchain will be the digital tool to replace paper.

There are over 100 companies already participating in the TradeLens’ digital platform which will integrate global shipping and trade partners including terminals, shippers, freight forwarders and ports.

HPA president and CEO Karen Oldfield said, “The timing couldn’t be better. Digitization is the efficiency vehicle for the global supply chain, and considerable work is being done in Halifax right now through the recently established Centre for Ocean Ventures and Entrepreneurship (COVE) and Volta Labs innovation hub. Through our involvement in TradeLens, we are taking the next steps to ensure the Port of Halifax is on the leading edge.”

“Everyone can benefit,” said White.

“Digitization is coming whether we like it or not. Industry needs to change and it would be good to have more companies involved early,” he added.

Railway gateway

Dan Bresolin, assistant vice president, International Intermodal, CN, who updated conference delegates on some of CN’s latest activities, said that since JJ Ruest, was appointed CN’s president and CEO, “there has been a theme of urgency throughout the entire team,” to move the railway forward.

He said this is a record capital year for www.canadianshipper.com November 2018 7

IN THE NEWS

CN with investments in safety, network infrastructure, equipment, and people.

He said most of the spending is in the West “but if things are fluid in the West they stay fluid in the East and the South.” But he stressed that the business at the Port of Halifax is discretionary cargo so all members of the supply chain gateway team need to work together as one team.

Bresolin said there had been recent discussion on Halifax as the Eastern gateway with much of the cargo passing through the port going to the U.S. To help make that cargo grow there needs to be a smooth flow over the bor-

der and that major crossing will be at Sarnia and Port Huron. Bresolin said CN plans to develop an live life intermodal inspection facility, similar to its successful operation in Rainer, Minn. to allow for short customs inspection periods and promote cargo fluidity.

In Nova Scotia, CN has 162 miles of track and has invested over $50 million in the last five years.

In New Brunswick where CN has 613 kilometres of track, the company will spend $30 million this year “to strengthen the rail network across the province, including safety,” Bresolin said.

The Port of Halifax announced just

days before the port days’ event that it plans to spend $35 million to extend its South End container terminal so it can handle two, ultra-large container vessels simultaneously.

In an interview with Canadian Shipper, Bresolin said CN’s role in the port and the extension “is as an enabler of the gateway” and that when the growth presents itself in Halifax, CN will make the investments needed “to make sure we have people, trains, conductors, everything in place so we can support the growth” now and for the long haul.

The HPA hopes to have the 130-metre extension operational in 2020. CS

Digital disruption of shipping The future of the industry discussed at St. Lawrence Shipoperators’ conference Was the next Jeff Bezos—someone with a business model so revolutionary it completely transforms an industry— sitting in the audience at a conference on artificial intelligence and autonomous ships in Montreal last month.

It’s possible, says Oskar Levander, a world-class Finnish naval architect and senior vice president concepts and innovation at Rolls-Royce Marine.

“Digitalization is going to be disruptive in shipping and create opportunities for novel business models and new players,” he said. “No one had ever heard of Uber ten years ago. The same will happen in shipping. The industry won’t look the way it does today ten years from now.”

Levander was one of eight presenters from the scientific, commercial and regulatory worlds who spoke at the daylong event, which was held at the exclusive St. James Club in the heart of downtown Montreal and near the offices of the lawyers, bankers and other marine company-related executives and representatives who made up the majority of the roughly 100 people in attendance.

Organized by the 82-year-old St. Lawrence Shipoperators (SLS), which represents 15 of Canada’s biggest ship owners and operators, the conference 8 November 2018 www.canadianshipper.com

By Mark Cardwell

focused on the opportunities, issues and challenges related to the advent of smart ships and shipping.

Presentations and discussions ranged from the esoteric to real-life possibilities, practicalities and pilot projects that use fast-evolving digital technologies and AI in the design and development of remote controlled or autonomous vessels and other maritime assets in smart marine ecosystem environments.

Dawn of a new era

Though at times fuzzy, the picture that emerged was one of an industry on the cusp of a technological sea-change similar to steam from sail, to diesel and to containers.

“We’re at the dawn of a new era,” said Levander. He said several drivers— everything from crew safety and operational costs to sustainability, risk and the increasing digital integration of cargo owners’ businesses—will lead to new roles and ways of doing in the shipping industry. They include new kinds and types of investors, the rise of digital market places and new forms of asset operation and management.

He predicts those changes will also change the way ships look and operate

Oskar Levander of Rolls-Royce Marine believes “Digitalization is going to be disruptive in shipping and create opportunities for novel business models and new players.”

in the coming years.

Levander presented slides showing futuristic vessels as well as the Svitzer Hermod, a 28-metre-long tug that last year became the world’s first remotely operated commercial vessel in Copenhagen harbour.

A joint project between global towage operator Svitzer and Rolls-Royce, the tug is maneuvered by a captain who sits at a computer game-like control station in a remote operation centre on shore.

Fellow European and Norwegian scientist Ornulf Jan Rodseth said ongoing smart-ship research in his country using small specialized vessels like ferries, survey ships and military vessels—an effort he calls “Shipping 4.0,” for the fourth industrial revolution—suggest that autonPhoto: Rolls-Royce Marine

IN THE NEWS

omous ships can cut manpower costs by 17 per cent and fuel costs by 38 per cent—though he admits there will long be a need for shore control centres “that keep humans in the loop.”

Smart ships, he added, also carry many sizeable inherent costs like numerous onboard sensors, cyber security systems, staffing at manned shore control centres and connections with on-shore communication systems.

Notably, he said that in “50 or 60 years” when these technologies are widely available and in use in many industries, new smart ships will likely be much smaller, more numerous and use a variety of propulsion methods, including wind and solar power, than currentday, diesel-powered behemoths.

For his part, Kevin Humphreys, general manager of merchant and gas carrier segment sales for conference sponsor Wärtsilä, told conference goers that the key to moving the yardsticks forward in regards to autonomous and remote-controlled shipping is by introducing digitalization technologies to conventional ships that will slowly reduce manning, build confidence and demonstrate proof of concept.

“There are incredible levels of inefficiencies across the supply chain,” said Humphreys. “We need to use the pieces of the digitalization puzzle that we are constantly acquiring to squeeze out inefficiencies over the route. Eventually, when ships and docks are sensored up, we’ll see a real revolution happen.”

Proceed with caution

The final speaker—Donald Roussel, senior advisor to the assistant deputy minister, safety and security at Transport Canada—threw cold water on the notion that autonomous surface ships with limited crews or no crews at all are just around the corner.

“As a regulator we are stuck with the job of making things happen out there [and] we imagine worst case scenarios,” said Roussel.

He said digitalization, robotics and other emerging technologies in the automotive and aeronautic industries are “moving as fast as light.”

The challenge for regulators, added

Roussel, is trying to both diminish the negative impacts and increase the benefits of disruptive technologies in a key global industry like the marine industry, which employs 1.2 million seafarers worldwide, accounts for 60,000 commercial ships—not to mention the hundreds of thousands of pleasure craft on Canada’s coasts and waterways.

“Who is coming to your industry to change everything—it’s an open question,” said Roussel.

At the same time, Roussel said the IMO and several other international organizations that set norms and guidelines for everything from bandwidths and electricity to oceanography and lighthouses need to grant approvals, as do civil authorities in sovereign states.

He lauded however, efforts like the founding in 2017 of the Smart Ships Coalition of the Great Lakes Basin, which recently opened the world’s first fresh-

water test bed for unmanned surface and underwater vessels on Lake Superior. the investment by Singapore in a shore-based control centre for remotecontrolled shipping, and development of MASS guidelines by a half-dozen countries and the IMO’s reception of proposals for interim guidelines.

Conference attendee Réjean Verreault, executive vice president, strategic initiatives and development with Quebec City-based Ocean Group, which owns more than 120 barges and other vessels—the largest private fleet in Canada—said his company has no concrete plans to buy and/or deploy unmanned or autonomous ships. “But we believe in this technology and we have people who are looking into it,” said Verreault. “It will happen in other industry like in others. But for now we need to listen and learn about it. That’s why this conference was so great.” CS

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Serge Carestia and his team at The Home Depot Canada have built an award-winning supply chain through best in class customer experience

BY JOHN TENPENNY

Serge Carestia, The Home Depot Canada’s vice president, supply chain, was nominated by associates from across the company for his inspirational leadership style.

10

November 2018

www.canadianshipper.com

Photo: Roger Yip

SUPPLY CHAIN AWARD

F

Photo: Susanne Rushton Photography

FMA Supply Chain Executive of the Year Serge Carestia (left) receiving the award from Lou Smyrlis, managing director, Newcom Media, CITT president and CEO Pina Melchionnna, and CITT chair Perry Lo.

trailers of product a week, lead time becomes critical and by being able to meet changed demand with allocation, what Carestia calls, “the effective lead time” shrinks dramatically and “the stores see that.”

The supply chain model The Home Depot Canada employs was adapted from its U.S. parent’s rapid deployment centre, which “really is not stocking product, but rather flowing product as it is required from the vendor anywhere in the world through to the store and possibly—as an extension—to the customer,” explains Carestia.

“We took that design and we adapted it to Canada. What we adopted was the flow part of it, not necessarily the actual configuration of the buildings.”

The U.S. stock and flow sides are two separate buildings in most cases, “but here in Canada we joined those buildings together so that we get synergies of placing both stock and any flow product on the same truck to the store.”

The supply chain pyramid

During Canadian Shipper’s conversation with Carestia at the company’s SFC in Vaughan, one theme is dominant throughout: teamwork.

He constantly deflects any credit for what the supply chain group has accomplished during the past seven years.

“I’m very proud of our team and what we’ve built,” he says simply. “We’ve built a supply chain that is really focused on the customer and is built off our values and the way we do business here at The Home Depot.”

More stock.

More flow.

Home Depot Canada currently has two Stock and Flow Campuses (SFC), one in Vaughan, Ont., and another in Calgary, Alta. Each SFC is approximately one million square feet in size spread across two buildings: • A Rapid Deployment Centre (RDC), which is distribution centre that sends products from vendors directly to stores; and • A Stocking Distribution Centre (SDC), which serves as a hub to warehouse product and service stores.

Vaughan • The Vaughan RDC services 125 stores from Man. to Nfld., has 186 dock doors, 800 trailer spots, and 657,000 sq. ft.

• The Vaughan SDC services 119 stores from Ont. to Nlfd., has 72 dock doors, and 260,000 sq. ft.

Calgary • The Calgary RDC services 57 stores from Sask. to B.C., and the Vaughan SDC for import stocked product, has 161 dock doors, 600 trailer spots, 425,000 sq. ft.

• The Calgary SDC services 63 stores from Man. to B.C., has 139 dock doors and 640,000 sq. ft.

www.canadianshipper.com November 2018 11

©iStock

or Serge Carestia and his team at Home Depot Canada it’s all about the flow; not a great head of hair—stock and flow, the supply chain model implemented by the company under the guidance of its vice president, supply chain, and the 2018 recipient of the Freight Management Association of Canada’s Supply Chain Executive of the Year award.

Prior to Carestia joining The Home Depot seven years ago, the company’s supply chain model had stores ordering product directly from vendors. Now, under the stock and flow model, orders are centralized at the company’s two stock and flow campuses (SFCs) located in Vaughan, Ont., and Calgary, Alta., with all the stores east and west served under one purchase order per SFC, respectively.

According to Carestia, who in his 25-year supply chain career has worked for the Hudson’s Bay Company, Mark’s Work Wearhouse and Canadian Tire, over 65 per cent of The Home Depot’s products go through the SFCs before reaching the stores.

These facilities enable the company’s distribution network to leverage trains as both SFCs are strategically positioned near rail lines. This has enabled the reduction of CO2 emissions through consolidated shipments from vendors and intermodal transportation while improving the accuracy and efficiency of its store shipments, helping the company to meet customer demands.

“From those two sites we can hit about 92 per cent of our customers within two days, whether it’s a store or direct to customer,” says Carestia.

Utilizing its forecast and replenishment team to keep stores fully stocked and ensure vendors have stock for online orders, he says, allows “allocation to be delayed up to the very last possible minute,” which allows for reduced lead time.

“For example, if a store quantity shifts on us because of events such as the recent tornados in the Ottawa area, and products are being sold more quickly, that allocation will actually change and dynamically give more product on the fly to those stores as required, with new purchase orders being adjusted.”

With some stores getting up to 20

SUPPLY CHAIN AWARD

An inverted pyramid—with the customer on top and the company president on the bottom—is how he describes the company’s leadership model.

“The higher level of accountability you have, the lower you are on the pyramid and you bear the weight of the organization.”

How that weight is distributed explains why support for Carestia’s nomination came not just from within his own team, but others he has come into contact with at The Home Depot.

“What united all of us in the nomination process was Serge’s inspirational leadership style,” says Victoria Toll, director of transportation at The Home Depot Canada. “He is very focused on delivering excellent customer service and he does it in a way that is collaborative, very cross-functional and he is flexible and open to change.

“Any associate feels that they have the opportunity to contribute, to provide good ideas, to create shareholder value

in concert with the rest of the team.”

Taking care of associates—as all Home Depot employees are referred to—is important to Carestia and it shows in the way he’s always looking to invest in associates in the right way, whether it be training or exposure to other senior leaders or taking on challenging projects, says Toll.

“Recently I had an associate come to me and say, ‘Victoria, I never would have applied for that job had I not heard Serge speak about the importance of taking on cross-functional collaborative assignments and I wouldn’t have aspired to do more had it not been for him.’”

Another example of Carestia’s beloved leadership style shone through during the opening of the stocking distribution centre (SDC) portion of the Vaughan facility.

“Serge’s vision for the building came through loud and clear as to what we needed to do collectively and collaboratively to make sure that customers

needs were met.”

Carestia’s approach is not a topdown one, adds Toll. He doesn’t pretend to have all the answers, instead challenging the team collectively to find the right one.

“He often says, ‘We’re not trying to build the best supply chain, we’re trying to build the best supply chain for Home Depot.’”

Changing expectations

Constructing that supply chain is still a work in progress, says Carestia. And that’s because of the customer.

“The customer is ever-changing,” he says. “And we’ve built a model that can get product from anywhere in our network to the customer, whether they want to buy the product in-store or online.

“Every retailer is facing the same challenges and expectations from customers.

Our focus is on giving the customer the same level of service in home delivery that they have come to expect in-store.”

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November 2018

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SUPPLY CHAIN AWARD

The supply chain at the home improvement retailer revolves around delivering the best possible customer experience, he says and is based on three simple questions:

“Our focus is on giving the customer the same level of service in home delivery that they have come to expect in-store.”

1. How do we build that customerfacing network?

2. How do we get close to the customer? And; 3. How do we flow product fast and efficiently to the customer?

more deliveries direct to home and job site than any other home improvement retailer in Canada.”

As the No. 1 appliance retailer in the country, many of The Home Depot’s deliveries are what the industry refers to as “white glove,” and Carestia says they want to make those experiences seamless for customers.

“It’s not just dropping it off,” says Carestia. “We come in your house, we put it in place, we take the old unit back and then we install, which a lot of companies don’t do. Our service extends well beyond delivering to the front door.”

For online orders The Home Depot has two direct fulfillment facilities that receive shipments from both vendors and the SFCs before going to a

“And we do all that in what I would call the Home Depot way, which is based on our values and culture,” says Carestia.

While The Home Deport stores still offer customers convenience, Carestia says the second phase of the company’s supply chain transformation entails building that same level of service customers expect when their goods are delivered to their home or job site.

“And we’re well on our way with that transformation,” he says “We do

— Serge Carestia, vice president, supply chain, The Home Depot Canada

last-mile agent. Special order products are also delivered from a SFC to the store to be picked up by the customer, explains Carestia.

“Eventually, we will have the opportunity to flow product either from our SFCs directly to the customer or continue to use direct fulfillment centres or cross-stock hubs across the country to get it on that last-mile truck.”

Their vision is to create an adaptable network, so that customers will be able to get products wherever and whenever they want, and for most items that means same day or next day delivery.

“We need to be flexible and we need to evolve as customer demands change so that we’re relevant and we’re best in class.” CS

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November 2018

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OUTLOOK 2019

Capacity Crunch Shipper-carrier cooperation is key to navigating rising rates

BY JAMES MENZIES

C

anada’s long-awaited electronic logging device (ELD) mandate should differ from the U.S. rule to avoid some of the pitfalls that befell the rollout of similar legislation there.

That was the opinion of a panel that discussed the issue at the recent Surface Transportation Summit. Steven Laskowski, head of the Ontario Trucking Association (OTA) and Canadian Trucking Alliance (CTA), pointed out one deficiency in the U.S. rules—the fact vendors can self-certify their own devices.

“What we have seen and found is the ability for people to rewrite their hoursof-service,” Laskowski said. “With [some of] these devices it’s a push of a button.”

He said the Canadian industry is lobbying for third-party certification of devices to prevent this problem, but he noted the vast majority of suppliers do meet the technical requirements.

Canada’s ELD regulation has been held up by bureaucratic red tape. Unlike in the U.S., where the federal government mandates interstate carriers, in Canada all provinces must handle enforcement.

“You’re not dealing at the table oneon-one with the feds, you’re dealing with seven, 10 other jurisdictions,” Laskowski said. “There was political footdragging on this.”

Mark Seymour, chairman of Kriska Group, who is a fan of the technology, shared his company’s experience when rolling out ELDs voluntarily between 2011 and 2014.

“The old paper-based log system is ludicrous,” he said. “And for those we’ll be introducing to our business in years to come, to teach them a system like that would frankly likely be enough to turn people away from our industry.”

He encouraged carriers that haven’t 14 November 2018 www.canadianshipper.com

yet made the transition to give themselves ample time and to implement them methodically.

“To wait and rush is just a recipe for disaster,” he said.

Carriers giving capacity to best customers

Shippers want more capacity and truckers want to give it to them. But new trucks don’t come from the factory with a driver installed, so both shippers and carriers are having to work together to make do with what they have.

“Cost reduction is always an ongoing opportunity for everyone,” said Charles Daharry, transportation manager, Lowe’s Canada during the Surface Transportation Summit’s shipper-carrier roundtable. “We can’t do that alone. We work very closely with our carrier partners to look at how to optimize the supply chain and find opportunities to increase efficiencies together.”

Carriers represented on the panel admitted they’re having to be selective as to which customers they award their limited capacity to.

“All participants in the supply chain need to work together to improve efficiencies,” said Jim Peeples, president, Challenger Group of Companies. “I’ll provide all the capacity [customers] need if they include me in their business processes. Too often, he added, inefficiencies in the supply chain simply get kicked down the road instead of being resolved.

Fleets aren’t adding new capacity because, while it’s easy to buy more equipment, it’s proving difficult to find qualified drivers.

“The spend on recruitment and retention is higher than it’s ever been,

and the retention piece is going to be a really big aspect going forward,” said Doug Sutherland, vice-president, Sutco Transportation Specialists. He said his company is avoiding the temptation to bring on new business and is focusing on serving its existing customers.

“You have a strong spot market, don’t go chase that,” he advised. “Stay with the customers that have been with you a long time and build that relationship.”

These comments are the culmination of several years of warnings from carriers during this annual roundtable discussion. Carriers on the panel repeatedly implored shippers to work with them. There’d be a day of reckoning, they warned, and that day has clearly arrived.

Martin Pede, manager of zinc sales and service with Hudson Bay Mining, acknowledged shippers have a role to play in eliminating inefficiencies and understanding that carriers’ operating costs are continuously rising while rates are not keeping pace, and must work more closely with their carriers.

“The RFP (Request for Proposal) has become more fluid and it needs to be more collaborative to ensure shippers’ needs are going to be met,” he said. “Shippers need to provide consistent volumes and information and can’t just draw a line in the sand. The RFP model is probably never going to go away…but the relationship aspect with carriers—especially truck carriers—has to become more ingrained in how the shippers approach the truck carrier market in this environment.”

Even when all the obvious inefficiencies have been eliminated from the system, there is still a need for rate increases.

Daharry admitted shippers don’t like discussing rate increases, “however it is a reality.” CS ©iStock

OUTLOOK 2019

Capital ideas Mainlines investing heavily in infrastructure as Bill C-49 takes affect

BY CARROLL McCORMICK

C

anada’s mainlines spend billions every year on capital expenditure (capex) projects, but this past year CN has been breaking records with a whirlwind of coast-to-coast announcements about details of its $3.4 billion capital program. CP plans to spend over $1.55 billion.

The mainlines’ capex programs include a flurry of equipment purchase announcements, such as several hundred locomotives, box cars and lumber cars. And inspired by changes to the Maximum Revenue Entitlement (MRE), CN and CP are buying a total of 6,900 of grain hoppers.

The MRE is a limit on the overall revenue that CN and CP can earn for shipping regulated grain. The limit was changed in the amendments to the Canadian Transportation Act (CTA) that came into force this May 23, in the Transportation Modernization Act (Bill C-49).

“There is a change in C-49 to how this is calculated. Railways like it. After the announcement, CN and CP announced large capital purchases of grain cars. I think the revenue caps will go up,” says Robert Ballantyne, president of the Freight Management Association of Canada.

Explaining its order for 5,900 grain hopper cars over the next four years, CP stated, “The investment is made possible by changes to the Maximum Revenue Entitlement formula ...” CP plans to put more than 500 into service by the end of 2018.

In May CN announced it would acquire 1,000 grain hopper cars over the next two years. The mainline explained the purchase partly as a phase out of older grain cars, partly so it can keep up with higher crop yields and partly because of “positive conditions” brought in ©iStock

by Bill C-59. Last March president and CEO JJ Ruest said, “We apologize for not meeting the expectations of our grain customers, nor our own high standards.

The entire CN team has a sense of urgency and is fully focused on getting it right for farmers and our grain customers ...”

Two other amendments to the CTA with the potential to positively affect freight rail, include long-haul interswitching and reciprocal penalties in a level of service arbitration, according to Ballantyne.

According to the CTA “The new Long-Haul Interswitching provisions enable certain shippers to make an application to the CTA requesting it to set a rate and the terms under which a local carrier must move the traffic to a connecting carrier that will perform the remainder of the movement. The nearest interchange can be up to 1,200 kilometres away, or 50 per cent of the total haul distance in Canada, whichever is greater. The CTA will render a decision within 30 business days.”

In plain English, long-haul interswitching gives a shipper with only one railway available for the first leg of a journey the option, with protection against an unfair charge by the initiating railway, to change to a second railway further down the track.

Citing some complexities and costs associated with it, Ballantyne says, “This is supposed to help shippers who are captive to one railway, but we are not sure how effective it will be, as it is not automatic, but requires application to the Canadian Transportation Agency.”

Looking to history for guidance, Ballantyne notes, “Long-haul interswitching replaces Competitive Line Rates, which were implemented in the 1980s

and were completely ineffective. Longhaul interswitching, if it is used, will be most useful to big shippers with the deep pockets to pursue it. There are a lot of things in this that will make it very difficult to use. Some traffic is prohibited; for example, some chemical products and intermodal and automotive. In addition, any traffic originating in the Quebec-Windsor or Kamloops-Vancouver corridors is also prohibited.”

C-49 also permits reciprocal penalties in a level of service arbitration. When a railway is in violation of its service obligations under a service level agreement, a shipper may be able to get compensation. Of this provision, Ballantyne says, “It may work, but it is a bit bureaucratic and requires a service level agreement between shipper and carrier. If the shipper says the railway is in violation, the penalty is not automatic the way the demurrage penalty is for the railways. The Agency-appointed arbitrator would have to determine that the railway is in violation, and set the penalty.”

Cross-border risks

Another big-ticket item, some effects of which could be felt next year, is the new United States-Mexico-Canada Agreement (USMCA) reached this fall, which replaces the North American Free Trade Agreement. How might the USMCA affect Canada’s rail industry in 2019?

“In terms of specifics of the deal, there are no major direct implications for cross-border goods trade. Apart from some expanded dairy sector imports from the United States, cross-border tariffs will stay where they are, including those on steel and aluminum,” says Dan Ciuriak, director and principal with Ciuriak Consulting Inc. www.canadianshipper.com

November 2018

15

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OUTLOOK 2019

In the longer term though, says Ciuriak, “The main thrust of the Trump administration is to repatriate its supply chain to within its borders. North America in 10 years will likely be a less integrated space, and this may have more significant impacts on cross-border traffic. As market access becomes less certain, many firms will decide not to pursue cross-border opportunities.”

The trade war that the United States has begun with China also will have implications in Canada, Ciuriak predicts.

“You will see companies restructuring their supply chains, to reduce their exposure to U.S. tariffs.” Down the road, the USMCA clause that requires Canada to clear non-U.S. trade deals with the U.S. could also affect rail traffic. “What will happen to trans-Pacific trade? There are implications for the rail industry in what is landing in Vancouver; for example— fewer shipments coming into B.C.”

Canadian crude exports by rail this year. Month-over-month increases from 2017 to 2018 have marched ever higher from the beginning of this year, to a more than doubling of shipped volume this July compared to July 2017, to 1,017,874 cubic metres.

The website Real Agriculture reports that the crude-by-rail export forecasts

are bullish, citing a prediction from the International Energy Agency that shipments will rise from 250,000 bbl/day in 2018 to 390,000 bbl/day in 2019. Speaking to concerns about whether this will affect rail capacity to move agricultural commodities, Real Agriculture quotes CN and CP as giving priority to transporting grain. CS

In short

The struggle continues to loosen government purses and make life easier for the country’s 50-some short line railways. This May, for example, the Railway Association of Canada “... expressed its profound discontent at the lack of capital funding programs dedicated to helping short line railways ...” This was in response to the news that Genesee & Wyoming Inc. would close the 278-kilometre Huron Central Railway, which runs from Sudbury to Sault Ste. Marie, if it could not secure $46 million in assistance. Despite having big-ticket clients like the Eacom sawmill in Nairn, government hearts remain cold. Without help, word is that the line will close by the end of 2018.

The residents of Churchill, Manitoba, on the other hand, got good news this September about the washed-out Hudson Bay Railway, which has been closed since spring 2017: The federal government announced it would hand over $74 million to help new owners—a consortium called Arctic Gateway Group—purchase and repair the line, which runs from The Pas to Churchill. An additional $43 million will subsidize the line for the next 10 years.

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OUTLOOK 2019

Bull Market Imports and e-commerce driving a robust industry

BY IAN PUTZGER

T

im Strauss, vice-president, cargo at Air Canada, has reason to be bullish. Revenues are up about 15 per cent this year, but actual growth has been closer to 21 per cent, factoring in the absence of freighters that had served several international markets in 2017.

Cargojet, which was operating those freighters, has enjoyed double-digit growth in its core overnight business, reports vice-president Jamie Porteous.

Forwarders have also been going strong. “This is probably the best year in our corporate history,” says Jeff Cullen, CEO of Rodair International.

The robust momentum stems chiefly from imports, which have increased faster than lift, pushing up yields as a result. During the 2017 peak season this led to capacity shortages and bottlenecks at some gateways. This year the impact is widely expected to be less severe, as growth has slowed down and the industry is better prepared.

The picture is less buoyant on the outbound side, particularly on the North Atlantic, rising volumes notwithstanding. While demand has gone up, capacity has outpaced the market.

“There’s been good momentum in the uptick in volume, but not the same sentiment with yield. There’s too much capacity in the market eastbound,” remarks Joe Lawrence, president of Airline Services International, which represents a string of carriers.

Some had expected the trade agreement with the European Union to trigger off a surge in traffic, but this has been less pronounced than hoped.

“Both in and out CETA has not grown as fast as we’d anticipated,” says Andre Goguen, president of AGO Transportation. “We’ll try to work more closely with our partners in Europe.”

In response to the relatively weak yields to Europe, European airlines

©iStock

have concentrated their sales efforts on traffic going further afield.

“Even today there is no direct service to Africa, but every European carrier that comes here flies to Africa. With European yields so low, they go for longer haul markets,” says Lawrence.

“It’s the same with Latin America,” he continues. “It’s cheaper via Europe than over Miami or on direct flights.”

His company has been feeding Canadian exports to a Latin American airline client’s southbound flights out of Miami, but the high trucking costs are undermining this model.

Trucking south of the border has been further affected by the ELD mandate, which has pushed rates even higher and prompted truckers to steer clear of routes that may incur an extra day in transit. This constrains the viability of routing traffic over U.S. airports, which may be the only option when shipments have to be carried on freighter aircraft.

“With the trucking situation, the use of U.S. gateways is challenging,” says Gary Vince, head of air freight, Canada at DHL Global Forwarding.

Lawrence hopes that the rise of ecommerce will hoover up surplus capacity and help boost yields. Without a doubt this sector has been a huge driver of the growth in airfreight volumes, and it looks set to continue. Strauss points to projections of around 19 percent growth in e-commerce over the next three to five years.

AGO Transportation handles a rising volume of e-commerce from China as well as in both directions between Canada and the U.S. “We do a lot of distribution. We break down consolidations and perform distribution,” says vice-president Sandra Faraj.

Kuehne + Nagel ramped up its focus on e-commerce this year with a new

global warehouse management system that serves as a digital platform for efulfillment centres.

“We’re in discussions with a number of e-commerce providers and trying to develop solutions for them. The technology behind it needs to be spot on.

Reliability behind it is a must,” says Alex Strohmeier, vice-president, airfreight.

The pharmaceuticals and healthcare sector has been another driver of growth.

Both Kuehne + Nagel and DHL Global Forwarding are well entrenched there and plan further developments. “We continue to enhance our product line with temperature control monitoring capability and technology,” says Vince.

His company broadened its portfolio this year with a push into the perishables sector, drawn by the rapid increase in exports, particularly to China.

Consumers there have shown a strong appetite for Canadian lobster and other seafood as well as for fruit and vegetables, notably cherries.

Strohmeier expects further growth of perishables exports in 2019. Lobster shipments to China stand to keep their upward momentum, especially as long as the trade dispute between China and the U.S. continues.

Airline Services International is broadening its portfolio through a partnership with a global on-board courier service, which it now represents across Canada. This segment has shown strong growth in recent years thanks to the rise of time-critical shipments such as medial samples and urgently needed replacement parts for stranded ships and aircraft.

Overall operators are planning for continued growth, albeit with a note of wariness.

“The economy is remaining strong, but there is some hesitation and concern where we’re headed,” reflects Cullen. “We continue to ride the crest of the wave and look to plug into some of the things that promise growth.”

Cargojet is looking to add to its freighter fleet to keep up with growth in the core parcel sector, but also for more contract flying and ad hoc charter work, says Porteous.

Adds Strauss: “We’re bullish. We’re adding more people.” CS www.canadianshipper.com

November 2018

19

OUTLOOK 2019

Track and Trace Technology is pushing the envelope when it comes to delivery options

BY IAN PUTZGER

T

he all-consuming surge in online shopping is inexorably turning parcel carriers into 24/7 operators. Purolator Courier, Canada’s leading player, stepped firmly out of the nine-tofive, Monday-to-Friday pattern this year with the launch of pilot projects for evening and weekend deliveries, a move that looks set to continue in 2019.

Purolator has been running trials in Toronto, Vancouver, Montreal and Ottawa with a small number of clients, and the results are encouraging management to take this to the next level in 2019, reveals Jeff Green, senior vicepresident of sales and customer experience. Early in the new year the company will extend to scheme to more clients and new markets, and the set-up should be fully established by mid-year, if everything goes to plan.

Greg Merz, senior analyst, transportation solutions consulting at enVista, a global consulting and software solutions firm, sees a steady shift beyond the Monday-to-Friday regime. Increasingly courier firms south of the border have been using the U.S. Postal Service for Saturday deliveries, he notes. In September FedEx Ground announced that its U.S. operations are now running six days a week on a permanent basis. Previously the integrator had only added a sixth day during peak times.

Merz does not expect the trend to stop on Saturdays. Eventually, the industry will move to a daily mode, he predicts, and this will put pressure on small operators that lack the strength and network and operate on tighter margins.

The extension of the working week has repercussions beyond drivers performing weekend deliveries. In May Cargojet, which provides the linehaul on trans-Canada trunk routes for the ex20 November 2018 www.canadianshipper.com

press parcel industry, added a Sunday flight to its schedule.

Operators are in expansion mode to cope with the rapid increase in traffic. In March UPS announced plans to invest $500 million in Canada. One quarter of this goes to the expansion of the firm’s Montreal hub to become its first automated sorting facility in Canada. Other projects include facility expansion in Ottawa, London and in the West and the recruitment of over 1,000 additional staff.

More such moves may happen in 2019, says Christoph Atz, president of UPS Canada.

“Probably the biggest focus for us now is accommodating growth,” says Green. Purolator is hiring over 1,500 employees and has invested in 300 vehicles and 40 new tractor trailers.

Adding more pick-up and delivery points is another priority. Some of this is covered through the deployment of trucks near customer locations to act as mobile points.

It is a race to provide customers with more options. Purolator has added a noon delivery slot to its roster.

Another key element is technology to allow consumers to track their shipments and play with delivery options. “The consumer wants more visibility and more control,” says Atz. “Consumers want to be able to set and change delivery options, default shipping locations and redirects.

We’ve seen an uptick in redirects.”

Three years ago UPS had 300,000 customers using its MyChoice offering, which allows them to track their shipments and control the timing and location of the delivery. Atz predicts that this will climb to 1.5 million over the next years.

Canada Worldwide, which offers shippers online access to capacity of all large parcel carriers in Canada through

its eShipper platform, has partnered with an omni-channel provider to allow its clients to utilize multiple shopping carts.

“Our customers sell on multiple platforms—not only on their own websites.

They don’t want to integrate with each one individually. They can integrate with us and channel the delivery on eShipper,” says Mo Datoo, director of strategy and planning.

The lines between B2B and B2C traffic are blurring. This allows UPS to leverage the breadth of its spectrum and take on a more consultative role for clients, says Atz. “There’s a convergence of B2B and B2C. Customers want the experience they have as a consumer for their business as well,” remarks Green.

For Purolator B2B is still the lion’s share of the business, but B2C is catching up. While the former has grown in the single-digit range this year, B2C is charging forward at a double-digit clip.

Operators see much promise on the international side. “E-commerce is starting to become an export game,” says Imtiaz Kermali, vice-president of sales and business development at Canada Worlwide. The company has been working with the Export Development Canada to help SME shippers venture into overseas markets.

This is also a major focus for UPS, which has been working with organizations like Startup Canada to support SME firms. “Cross-border e-commerce will continue to grow over the next few years,” predicts Atz. We anticipate that export will be a major driver.”

He adds that emerging markets like India, the Middle East and Africa are a major focus for UPS. Canadian consumers’ growing interest in goods from online merchants outside the country should generate further growth in inbound e-commerce volume and bring more opportunities for distribution and fulfillment. Additional momentum will come from the newly signed USMA agreement, which will push up the de minimis threshold for duty-free personal imports from $20 a day to $150.

For Green relief is the paramount reaction. “We are already moving significant volumes from the U.S.,” he says. “I’m glad that the trade negotiations ended well.” CS ©iStock

OUTLOOK 2019

Compliance Complications Global trade, regulatory and economic issues challenge marine sector

BY LEO RYAN

C

hallenging times persist for the world’s shipping industry. But there have been significant new factors at play beyond fleet over-capacity, volatile freight rates and struggles to build respectable profit margins. Most prominent among these are global trade conflicts provoked by the Trump administration, a cooling global economy, and the early manoeuvres by carriers to recover costs from the introduction of low sulfur bunker fuel under a new regulation by the International Maritime Organization (IMO) taking effect on Jan. 1, 2020.

The stricter IMO emissions regulation, meant to foster a greener environment lowers the cap for compliant fuel oil from 3.5 to 0.5 per cent. Analysts estimate the spike in fuel costs will initially amount to US$60 billion for the world maritime industry.

Thus, major container carriers argue that the higher costs will need to be passed onto shippers because the regulation could add $184 to $264 per twenty-foot equivalent container unit (TEU).

This is hardly welcome news for cargo owners, but Bruce Barnard, a U.K.-based veteran analyst of global shipping trends affirms “there’s no guarantee they will be able to pass on the entire cost.”

In this regard, SeaIntel, a Danish maritime consulting firm, recently suggested that shippers preparing budgets for 2019 should “take into account the ©iStock

likelihood of freight rate increases of up to 13 to 20 per cent seen from a global average perspective.”

On the assumption that the spread between high sulfur and low sulfur oil will be $250 per tonne by 2020, HapagLloyd has placed the price tag of compliance to the IMO 2020 regulation at “around $1 billion in the first years.”

Maersk, the world’s largest carrier, says its bunker costs would climb by more than $2 billion annually, adding 35 per cent to its total fuel bill and eight per cent to total costs. France’s CMA CGM expects its bunker costs to rise by $1.5 billion, adding the equivalent of nearly 60 per cent to its total fuel bill, while MSC sees its extra costs at more than $2 billion a year. OOCL calculates the extra cost of compliance at more than “half a billion dollars.”

Some shipping lines, including Maersk, have begun to adopt scrubber technology on container vessels. Fitting scrubbers to clean up exhaust emissions costs up to $3 million per ship. For its part, CMA CGM plans to burn low sulfur fuel and power nine of their mega-ships on order via liquefied natural gas.

However, shippers have hardly been enthused by low-sulfur fuel adjustments announced in September and October by five global carriers for implementation, in some cases, as of Jan. 1, 2019.

Hapag-Lloyd indicated that a so-called

Marine Fuel Recovery mechanism will replace all existing fuel-related charges.

Shippers slam surcharges

Taking strong issue with specific reference to Maersk Line was the Global Shippers Forum (GSF), of which the Freight Management Association of Canada is a member. As well as objecting to bunker surcharges being levied 12 months before the IMO rules kick in, the GSF noted that “the greater number of revenueearning boxes sailing west will collectively pay far more than they need to in order to compensate for the same boxes returning east when empty.”

GSF secretary general James Hookham bluntly stated: “GSF will be taking this piece of financial engineering apart piece by piece as we suspect this has more to do with ( freight) rate restoration than environmental conservation.”

Meanwhile, the International Monetary Fund this fall downgraded its forecast for global growth to 3.7 per cent in 2018 and 2019 from 3.9 per cent last July.

The gloomier world outlook plus escalating trade tensions prompted U.K.based Drewry shipping consultancy to lower its forecast for container demand over the next five years in its latest report. The industry faces being stuck with the present over-supplied situation for several more years.

“The anticipated re-balancing of the www.canadianshipper.com November 2018 21

OUTLOOK 2019

container market looks to have been postponed,” Drewry opined. “That’s more bad news for carriers that are facing substantial cost increases as a result of stricter ship fuel standards from 2020.”

After world seaborne trade grew by a healthy four per cent in 2017, similar growth, led by container and dry bulk shipments, was forecast for 2018 by the

United Nations Conference on Trade and Development (UNCTAD).

But the UNCTAD annual review of maritime transport also contained a cautionary message that obviously alluded to the trade wars initiated by President Trump against China, Canada, Mexico and the European Union.

“While the prospects for seaborne

DAILY

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ALABAMA • GEORGIA • KENTUCKY • TENNESSEE

22

November 2018

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trade are positive, these are threatened by the outbreak of trade wars and increased inward-looking policies,” the UN agency said, adding: “Escalating protectionism and tit-for-tat battles will potentially disrupt the global trading system which underpins demand for maritime transport.”

U.S. tariffs on Chinese imports are expected to hit the trans-pacific trade in the near future. “But right now,” reports Barnard, “the trade is on a roll, with spot rates almost double the level a year ago at around $2,500 per fortyfoot container (FEU) as U.S. importers rush to boost their stocks ahead of the hike of U.S. tariffs in Chinese goods from 10 to 25 per cent in January 2019.”

On the other hand, freight rates from China to North Europe have tumbled by more than a quarter since the peak season high in August. And carriers cancelled eleven round trips in October, removing around 200,000 TEUs in response to weakening demand.

Business as usual

As far as the USMCA trade agreement is concerned, the impact on the marine shipping and ports sectors in Canada is still being measured at this early stage prior to ratification.

“Since our member vessels trade between Canadian and overseas ports, the revised NAFTA has little effect on their operations,” remarked Michael Broad, president of the Shipping Federation of Canada. “There may be some fallout from the agreement with respect to products such as auto parts which may be imported into Canada from, say, Asia or Europe. Of more concern would be tariffs applied against goods originating from countries outside North America and bound to the U.S.” Paul Pathy, president and CEO of Fednav Limited, points to some silver linings amidst the tariff-filled scenario.

“First of all, “ he said in an interview with Canadian Shipper, “the new NAFTA deal has no impact on anything we do, to my knowledge, as a shipping company.

Initially too, the Trump tariffs have had no effect. We are bringing in a lot of steel in from Europe for the United States. The U.S. economy is booming and people are buying steel even though prices are very high. We are also bringing in steel slabs from Brazil to Hamilton.” CS

2019 3PL STUDY

SHIFTING SANDS

2019 THIRD-PARTY LOGISTICS STUDY The State of Logistics Outsourcing Results and Findings of the 23rd Annual Study

Annual survey highlights supply chain technologies

I

n an era where technology is continuing to migrate consumer spending habits online and away from brick-andmortar stores, the newly released 2019 Third-Party Logistics Study highlights how supply chains are also going digital and using science to keep pace.

The need for agility

What are the top concerns and challenges in regards to supply chain decisions? This can be answered from two different perspectives: the companies that manufacture and distribute goods and services (referred to as shippers in the study) and third-party logistics providers (3PLs).

In order, the top nine concerns for shippers: infrastructure; workforce readiness; economic stability; freight/supply chain transparency; lack of strategic partners/suppliers in the region; regulations/tax structure; security/crime/corruption; executive-level talent; border-crossing delays.

The list for 3PLs: workforce readiness; infrastructure; economic stability; freight/supply chain transparency; lack of strategic partners/suppliers in region; executive-level talent; security/crime/corruption; regulation/tax structure; bordercrossing delays.

Shifting consumer buying habits, which include a blend of in-person and online purchases of goods and services, requires quicker responses than the retail model of yesteryear. Shippers recognize the need for agility, but 42 per cent of survey respondents said they have not made the required changes to improve their agility over the past five years. Fifty-one per cent of participants did say, however, that they are open to new ideas, creating more opportunities for 3PLs to introduce and implement innovations.

The last yard

A key complaint among consumers who choose home or office delivery is that packages become lost more frequently. Within the last mile of the supply chain, defined as the final steps of package delivery to a person’s home or business, exists an undervalued concept known as the last yard. The majority of shippers (71 per cent) and third-party firms (72 per cent) recognize its influence on key retailer metrics such as consumer satisfaction and brand loyalty. Yet, only roughly a third of all survey takers agreed that companies do enough to effectively manage last yard issues.

In any given week, consumers buy products online for home delivery or in-store pickup and also still visit physical stores to make a purchase or return. This shopping blend is known as the omni-channel. Retailers have been working hard to emphasize an always-on, always-open shopping experience that provides seamless interaction across all retail sales channels, and that is creating different demands on all supply chains. In the survey, 38 per cent of shippers said they are in-

The 23rd annual Third-Party Logistics Study highlights how supply chains are going digital and using science to keep pace as consumer's spending habits migrate from bricks-and-mortar stores to online.

consistent across the omni-channel and 36 per cent noted they have no capability in this area. Supply chains are investing in integrated technologies to reverse this trend, which include: Enterprise resource planning software (72 per cent); warehouse management systems (56 per cent); transportation management networks (38 per cent); and supply chain visibility tools (34 per cent).

Minimizing disruptions

Disruptions break even the strongest links across supply chains. When disruptions occur due to natural disasters, extreme weather or pandemics, supermarket shelves are missing key household items and products are out-of-stock online. The most common impacts, according to shipper respondents, are increased transportation and logistics costs (75 per cent), transportation and logistics network disruptions (73 per cent), and higher supplier costs (66 per cent). The level of importance that companies and 3PLs place on mitigating these disruptions is greater than five years ago, with 23 per cent of shippers and 22 per cent of 3PLs scoring it significantly great. The study notes that two major tools that companies and thirdparty logistics organizations can utilize to minimize disruptions are visibility tools (61 per cent of shippers and 67 per cent of 3PLs) and partnerships (72 per cent and 64 per cent, respectively). In the area of predictive analytics, 33 per cent of 3PLs and 17 per cent of companies are making use of these cutting-edge tools.

The 2019 study was produced by Penske Logistics, the global logistics and supply chain management provider, Infosys Consulting, the strategy and transformation consulting arm of Infosys, Penn State University, and global talent advisory firm Korn Ferry. CS www.canadianshipper.com

November 2018

23

SURFACE TRANSPORT

Special corridors for oversize loads in Canada is a work in progress

BY CARROLL McCORMICK

S

queaking around corners, ducking under power lines, creeping over culverts, stretching up over guardrails, route planning, permit-getting, utility-hiring and all the rest for oversize and overweight loads ... What a headache.

And the cost per move can easily run into six figures.

There are challenges galore to moving such loads, as highways, bridges, overpasses and powerlines have traditionally not been built to accommodate them. In some provinces though, there is salvation on some modified routes.

They help minimize the endless, repetitive tasks normally demanded for every new move, and their cost.

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November 2018

www.canadianshipper.com

Best in-class

Alberta, where sometimes fantastically large components are trucked to the oilsands, is the best example.

The roads highlighted on the Alberta Ministry of Transportation map of what it calls its high-load corridor— able to accommodate loads up to nine metres high—spread like cracks in a windshield across the province: 842 kilometres north from Calgary to Manning, 190 kms east from Calgary to just shy of Brooks, 357 kms north from there to Viking, 546 kms from Viking to Fort MacKay ... the list goes on. Many of the routes were privately financed.

The corridor, born some 30 years ago, continues to grow, with a $753,000

high-load corridor project approved in 2014 to ease the way for loads on Highway 53 from Ponoka to Highway 21 north of Bashaw. The Gemini Corporation was willing to pay over $500,000 of that cost because, the existing road was costing the company $100,000 in fees.

A more recent project, announced in 2018, is a $90-million upgrade of the Vinca Bridge northeast of Edmonton.

Shortening the travel time for big loads going to and from the oilsands, it will save about $10,000 per trip.

The corridor’s Highway 9 meets Saskatchewan’s high clearance/heavy haul corridors (different province, different label) at Highway 7. It rolls 261 kms east to Saskatoon. From a fork in ©iStock

SURFACE TRANSPORT

The concept of building an oversize load corridor between Thunder Bay and Winnipeg is something the Ontario Ministry of Transport is considering, but not actively pursuing.

Credit: Thunder Bay Port Authority

Alberta’s high-load corridor is able accommodate loads up to nine metres high, and criss-crosses most of the province.

Rosetown, another section runs 399 kms on Highway 15 to Melleville. The maximum unobstructed height is approximately 5.1 metres.

Saskatchewan appears to be pondering adding more corridors. Its document: Ministry of Highways and Infrastructure Plan for 2018-19, states, “... provide a network of high-clearance corridors ..,” but the budget highlights include no line item for such work.

Heavy lifting

Ontario is bereft of an oversize corridor, but there has been discussion since at least 2010 of building one in SarniaLambton. The core objective is to get oversize loads from local fabrication

shops to Sarnia Harbour without the Sisyphean duplication of expensive tasks such as lifting power lines and moving street lights, notes Rick Perdeaux, the chairman of the Sarnia Lambton Industrial Alliance (SLIA), “... [to] reduce the amount of duplicate services in the three jurisdictions—municipal, provincial, county. We have quite a large number of highly skilled fabrication firms, predominantly serving the oil and gas and bio industries.

Shipping large, oversize goods has some interesting challenges.”

Consulting firm CPCS published a detailed analysis of the concept in its “Business Case Analysis for Oversized Freight To/From Sarnia-Lambton” in November 2016 for the SLIA and the Sarnia-Lambton Economic Partnership. The corridor map, which lists 11 fabricators, zigzags northward from the Courtright Line to Exmouth Street, and then west to Sarnia Harbour. It totals roughly 35 kms of road.

CPCS reports that the cost of moving a load in the area under discussion ranges from $15,000 to $150,000.

The CPCS cost-benefit analysis is compelling: Creating the corridor would cost an estimated $11.4 million.

Annual sales attributed to the benefits accruing from it were estimated to be $9.6 million. Looking at a 30-year horizon, the study valued the benefits of the corridor as adding $263 million to Canada’s GDP, 2,613 full-time equivalent

jobs, and $21.4 millioin in tax revenues.

Potential markets in which SarniaLambton fabricators could find opportunities, in order of strength, include Atlantic Canada, Alberta, the U.S., Mexico and the Middle East.

Still, the corridor has not attracted any provincial or federal grant money.

However, Perdeaux says, “The province has said it will loan us the money.

The question of borrowing the money and paying it back is being closely scrutinized.”

Another possibility is to begin working on the project in segments and apply for funding. Perdeaux notes that the City of Sarnia, Township of St. Clair, and the County of Lambton have announced they would work together, with details to come.

The CPCS study notes that while the corridor would be helpful in getting loads to Sarnia Harbour, for those loads bound for Western Canada via the Port of Thunder Bay, which has made handling oversize loads a specialty, the highway is a bottleneck.

“There is ample space and technical equipment to load and unload oversize products at the Port of Thunder Bay. However, moving west by road from Thunder Bay also involves road restrictions. Until you reach the designated “High Load Corridor” in Alberta, which accommodates loads up to 29.5’ (9 m) high, movements are generally limited to about 18’6’ (5.6 m) high and www.canadianshipper.com November 2018 25

SURFACE TRANSPORT

“We are making progress ... We have an engaged government.

It has just been a lot slower than we ever imagined.”

— Dave Earl, president, British Columbia Trucking Association

18’ (5.5 m) wide,” writes CPCS. Having researched the oversize load corridors in Alberta and Saskatchewan, the SLIA is aware of this bottleneck. Commenting on a rumoured concept to build an oversize load corridor between Thunder Bay and Winnipeg, Perdeaux says, “It is something that is on the Ontario Ministry of Transport’s burner. It is an active thing that is going on.”

Asked about such a plan, Ontario’s Ministry of Transport simply dodged the question. The province’s 2016 budget includes the phrase “creating Superload corridors” but perhaps that idea sank with the Liberal government ship in the 2018 general election.

In the planning stages

Asked too about such a plan, Manitoba Infrastructure replied, “Manitoba Infrastructure is in the process of reviewing its strategic highway corridors and the allowance for oversize loads is a part of this. This would include working with other jurisdictions to harmonize these requirements.”

In 2015, the future for improving the conditions for moving oversize loads in British Columbia looked rosy. The government had published B.C. on the Move: A 10-Year Transportation Plan. One of its goals was to “ ... work with industry to expand the number of provincial highway corridors pre-approved for the transport of 85- to 125-metric-tonne loads.”

The government was also working on an automated, online pre-approval system. One refreshing feature would be that that a load configuration for a given, requested route that matched one that had already been approved by the province would be approved within 48 hours. (The current system requires that every new shipment on a requested route requires engineering and approvals as though nothing like it had ever run the route before.)

But then the government changed,

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SURFACE TRANSPORT

B.C. on the Move disappeared, the automated system went sideways, and no pre-approved 125-tonne routes emerged.

Despite these setbacks, however, progress has been made. The Ministry of Transportation and Infrastructure reports that, as of October 2018, approximately 6,500 kilometres of road are preapproved for 85-tonne loads, with two more routes nearing completion.

Many bridges in the interior and northern B.C. have also been upgraded or replaced, with higher weight limits.

As for 125-tonne routes, the Ministry told Canadian Shipper, “The Ministry is getting ready to launch the corridors soon, after considerable work over the past few years assessing the routes and working with industry on vehicle combinations. Available corridors will be between two Lower Mainland ports and the Alberta border near Jasper, in both directions.”

And that automated online permitting system? “The developer responsible for implementing [it] experienced some issues delivering on the contract, and eventually defaulted. The Ministry remains committed to improving our automated permit capabilities, and work is progressing towards a new product.”

Dave Earl, president of the British Columbia Trucking Association (BCTA), says, “The contractor lost an entire season of work. The last update we received is that the data is being compiled. It is not working well. They have taken steps this year—in the last 90 days—to streamline the process, but we’re saying, ‘you have to do better.’

“From downtown Vancouver to Kamloops there are eight or nine municipalities. We have to work with every municipality. We have identified this as a problem. What boggles my mind is that every load [requires new engineering, etc].”

Higher weight limits are one thing, but height clearances are another. In some areas it is five metres, in others less. “I have an overpass on Highway 1, a major east-west corridor, with a 4.1-metre clearance,” Earl says.

On the clearance topic, Cory Paterson, Director of Policies for the BCTA, says, “The big issue that we have in B.C. is that we have a number of railway

overpass obstructions. It has been a three-to-four-year challenge getting a 4.8-metre high-load corridor approved.”

Earl remains positive. “We are getting there. We are making progress with project cargo corridors. We do have an engaged government. It has just been a lot slower than we ever imagined.” CS

Carroll McCormick is an award-winning writer who has been covering transportation industry issues and technologies for more than a decade.

He is based in Quebec.

www.canadianshipper.com

November 2018

27

WEST COAST GATEWAYS

With capacity becoming tight and future growth predicted, the Port of Vancouver has a plan

BY JOHN TENPENNY

P

orts don’t create trade, they facilitate it.

That’s the opinion of Peter Xotta, the Vancouver Fraser Port Authority’s vice president of planning and operations. And there is plenty to facilitate.

After a record-setting 2017 the Port of Vancouver has only seen volumes rise this year, with mid-year overall cargo hitting 72 million metric tonnes (an increase of 4.4 per cent) and containers reaching 1.64 million TEUs. With this kind of volume, and the recent ratification of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which is expected to bring billions of dollars more in trade, there are concerns about Canada’s ability to capitalize on future opportunity and transport goods in and out of the increasingly busy West Coast, particularly Vancouver.

“Part of the narrative around Canadian supply chains—and Vancouver specifically—has been concerns around capacity or congestion and we’ve been involved in some initiatives at the forefront of acknowledging where we have some bottlenecks and trying to address those,” he says.

“It’s not about trying to pull the wool over anybody’s eyes, because customers know full well when they’re experiencing good service or not, so we’re trying to act as a catalyst for having the right conversations.”

The gateway gang

What does that look like?

Since 2009, $7.5 billion has been invested in port infrastructure to support port activities, and that doesn’t include over $2 billion in private investments in bulk terminals facilities.

Much of the funding has come from the federal level, under two governments and various programs. The latest source of funding has come in the form of the National Trade Corridor 28

November 2018

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Fund, under the auspices of Transport Canada’s Transportation 2030 strategic plan.

According to Xotta, the port authority’s response was to work with local stakeholders to maximize the region’s opportunity under the umbrella of the Gateway Transportation Collaboration Forum (GTCF). It consists of the B.C. Ministry of Transportation and Infrastructure, the port authority, TransLink and the Greater Vancouver Gateway Council.

“It’s kind of unique in that it was the stakeholders locally acting as self-catalysts to put together as comprehensive and cohesive a message to Ottawa about what the priorities were,” says Xotta.

The ‘Greater Vancouver Gateway 2030’ was the GTCF’s strategy for infrastructure investment and nearly 40 transportation projects were identified, with the port authority submitting nine funding applications, encompassing 17 of the 40 projects, to the National Trade Corridors Fund.

Earlier this year, the federal government announced funding commitments of more than $200 million for Gateway 2030 projects.

That remarkable success was in part because the government recognized the importance of the Vancouver Gateway, says Xotta. “They recognized the diligence that had gone into assessing and identifying those priorities and recognized that deploying capital in this region will allow us to continue the growth trajectory we’ve experienced as a country and in Vancouver.”

Included on the list of ongoing projects is the Delta Terminal, Road and Rail Improvement Project, a partnership between Deltaport operator Global Container Terminals (GCT) Canada. A series of upgrades to existing transportation infrastructure serving Deltaport terminal, including reconfiguration of the intermodal yard will allow for an increase in container capacity from 1.8 to 2.5 million TEUs. Photo: Vancouver Fraser Port Authority/William Jans

WEST COAST GATEWAYS

The Deltaport Terminal, Road and Rail Improvement Project will allow for an increase in container capacity at the GCT Canada-operated Deltaport terminal of 600,000 TEUs.

The introduction of semi-automated operations is the key to increasing capacity and velocity. Eight electric low-emission, wide-span Kuenz intermodal cranes lift containers on and off rail cars. The cranes are fed by manually-operated auto-decoupling yard tractors that deliver containers from the vessel. The containers are dropped off at the rail transfer facility.

The port authority has also approved the permit application for the Centerm Expansion Project and South Shore Access Project. With construction set to begin in early 2019, the projects at Centerm container terminal, operated by DP World Vancouver on the south shore of Burrard Inlet, would increase peak handling capacity from 900,000 to 1.5 million TEUs. The proposed Roberts Bank Terminal 2 Project is currently undergoing a federal environmental assessment by an independent review panel, under the Canadian Environmental Assessment Act, 2012 (CEEA).

Pending approval, construction of the 2.4 million TEU container terminal is expected to be complete by the late 2020s.

The Tsawwassen Container Examination Facility for the inspection of shipping containers imported through Deltaport, in partnership with Tsawwassen First Nation and the Canada Border Services Agency (CBSA), has been completed and is expected to be fully operational by the end of this year or early in 2019.

According to Xotta, this facility is a big step forward for the Gateway that will drive both security and efficiency while meeting anticipated growth. The facility, which has 15 shipping container examination bays, will join two similar centres on the west coast, one in Prince Rupert and the other in Burnaby.

Global demand for Canadian agricultural products also continues to foster significant private investment in bulk terminal facilities, says Xotta. That investment, he says, has followed the dramatic shift in the annual throughput of agricultural products in Vancouver since 2012, which saw the historical average of 16 to 19 million metric tonnes skyrocket to 26 million in 2017.

Front and centre is the creation of G3 Terminal Vancouver, a new $550 million grain terminal. The “first new grain terminal in Vancouver in generations and the first on the west coast of Canada since 1984,” says Xotta.

And it’s not just grain that is getting investment dollars.

K+S Potash Canada and Pacific Coast Terminals (PCT) recently commissioned the opening of a state-of-the-art potash handling facility at PCT’s Port Moody terminal in 2017. Work included modifications to PCT’s existing facility as well as the construction of a new 263-metre potash storage warehouse with capacity for 160,000 tonnes of product.

Technology talks

The Vancouver Fraser Port Authority works with supply chain partners and port stakeholders to build future capacity

The Centerm Expansion Project and South Shore Access Project, set to begin in early 2019, will increase the container terminal’s peak handling capacity by 900,000 TEUs. Photo: Vancouver Fraser Port Authority

through increased efficiency, says Xotta and the port does its best “to make sure there is a balance of interests because we need to respect all of those critical players in the supply chain.”

To that end, the emphasis, he says, is on data visibility and transparency.

An example of this is the port authority’s Supply Chain Visibility Project. Launched in 2015 with a $250,000 matching grant in 2017 from the federal government, the project’s goal was to assess real-time information on supply chain performance for all bulk cargo moving to and from the port. This joint effort between Transport Canada and the port authority served to provide visibility into current supply chain performance, better identify rail and road bottlenecks, support the prioritization of infrastructure projects and optimize existing operations.

The initial pilot project tracked bulk grain, coal and fertilizer rail shipments near real-time from the inner provinces of origin through to Vancouver marine terminals to vessels. Future phases will include other commodities, such as forest products and container shipments. The data is made available through a dashboard for all those participating in the project, including CN, CP, terminal operators, Transport Canada and other supply chain participants.

The idea, says Xotta, is that the project could ultimately be a national foundation for supply chain monitoring by the federal government.

“Our suggestion to them has been that as the regulator, this kind of initiative brings an opportunity to assess and know in real-time where the challenges are, and thus where public resources might be best delployed.”

There is very little, ultimately, that ports control, says Xotta, but he feels they can have influence and the strategy should be getting better visibility, which leads to conversations about how to use information technology to predict or anticipate future challenges.

“And the port authority wants to be part of those conversations.” CS www.canadianshipper.com November 2018 29

The supply chain never sleeps.

And neither do we.

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Learn more about our North American logistics and technology solutions at Transplace.com.

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WEST COAST GATEWAYS

Behind the scenes, one organization is leading the charge to make Vancouver a leading world maritime centre

BY JOHN TENPENNY

T

he Port of Vancouver facilitates trade for Canada around the world, but to be considered a leading international shipping centre requires more than exporting grain and importing appliances.

Attracting the businesses behind international trade is the job of the federally and provincially funded Vancouver International Maritime Centre (VIMC), which is focused on attracting new investments and selling the advantages of basing shipping industry companies in Vancouver, especially those in the sector’s lucrative and high-paying service arena.

According to executive director Kaity Arsoniadis-Stein, the VIMC has promoted Vancouver as the preferred global location for the international shipping market. By marketing Canada’s strategic location and business opportunities, the threeyear VIMC project has exceeded all its targets and has had an economic impact of over $1 billion. The initiative created well over 200 jobs, in the first year, and has attracted over 16 international companies to date. Renewed funding, notably from the minority NDP provincial government elected in May, is being sought for the pilot program that expired earlier this year and was supported by the previous Liberal government.

“Canada is known for its strong modern economy, universal healthcare system, stable political environment, worldleading banks, high caliber business support services, hightech capacity as well as easy access to capital markets in North America,” commented Arsoniadis-Stein during a ceremony welcoming the city’s latest shipping tenant: the China Navigation Company (CNCo).

CNCo is a leading provider of sustainable shipping solutions, based in Singapore and held directly by the parent company John Swire & Sons, headquartered in the U.K. The new office is CNCo’s biggest in North America and will oversee the dry bulk and liner businesses under its Swire Bulk and Swire Shipping divisions, respectively.

Some of the global shipping industry companies that have major offices in Metro Vancouver now include Seaspan Corp., Teekay Corp., Pacific Basin Shipping Ltd., Mediterranean Shipping Co. and Methanex Corp.’s Waterfront Shipping Co. Ltd. “Over the years Vancouver has been a significant regional hub for North America’s shipping activities, with its deep-rooted history in the forestry and mining sectors, along with its role as the main export point for Canada’s vast grain and potash exports to Asia and the rest of the world,” said Robert Heal, general manager commercial, Swire Bulk West Coast Americas. “Through the VIMC, we have learned of Canada’s business advantages and globally competitive standards.”

Photo: Vancouver International Maritime Centre

(L to R): Graham Clarke, founding chairman, VIMC; Bruce Ralston, Minister of Jobs, Trade & Technologies, B.C.; Chris Daniells, commercial director, CNCo.

Stiff competition

While the city still trails other leading maritime ports, a recent study highlighted factors that make it an attractive option.

Deloitte’s EU Shipping Competitiveness Study was commissioned by the European Community Shipowners’ Associations to provide data on competitive threats to the EU’s ports and to provide ideas on how to retain and expand market share.

Vancouver is one of five “leading international shipping centres” used in the report’s comparative benchmarking analysis. Singapore, Hong Kong, Dubai and Shanghai are the others.

The report noted that, while most of the five still have minor global market share relative to the EU, “they experience high growth rates and are named the main competitors to the EU for location of strategic, commercial and operational shipping activities.” Vancouver scored well in the report’s regulatory, economic and political factors category.

However, it still lags behind other shipping centres in availability of finance and is even further behind when it comes to local access to the legal, finance, logistics, insurance, brokering, chartering and professional services that are critical to success in the complex business of international shipping.

Arsoniadis-Stein said the report will help the organization’s mandate because it gives Vancouver top scores in critical areas, making it a good place from which to conduct business.

But she said improvements are needed in several areas to increase the attraction of Vancouver to major shipping industry companies, including immigration complications for top executives, which need to be eliminated if the region hopes to attract more head offices.

Arsoniadis-Stein added that, while “Canada has some of the strongest banks in the world, none of them have international shipping expertise, and therefore there is no availability of ship finance. This is a big weakness. Shipping is a capital-intensive industry sector that requires significant investment.” CS www.canadianshipper.com

November 2018

31

Whether it’s across town or halfway around the world, with every shipment and every project, our customers place their trust in our hands. My hands. Because at some point, every piece of business I touch becomes a personal responsibility. It’s up to me to keep costs down, performance on schedule, and quality at a premium. Someone’s business is riding on it. And I won’t let them down. I am

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FREIGHT FRENZY

Shipment levels in 2018 compared to previous year

Shipment volumes are higher than expected in 2018. Can it continue into next year?

How busy has 2018 been? Advance results from our annual Transportation Buying Trends Survey shows almost two thirds of Canadian shippers increased their freight volumes in 2018 compared to the previous year.

And almost a quarter kept their freight volumes on pace with 2017, which was a strong freight volume year itself.

Buoyant freight volumes are expected to continue into next year with six in 10 Canadian shippers expecting further increases in their freight traffic and more than a third expecting the pace to stay the same.

Freight forwarder Third-party logistics

Wholesale

6% 6% 9%

11% 3%

30%

0%

of respondents

Down 10-20%

1%

Down 5-10%

6%

About the same

24%

Up 5-10%

39%

Up 10-20%

18%

Up more than 20%

8%

Not sure

4%

Shipment level projections for 2019 compared to this year

Sector Retail

Down more than 20%

Resources

33% of respondents Manufacturing

Down more than 20%

0%

of respondents

Down 10-20%

2%

Down 5-10%

2%

About the same

35%

Up 5-10%

48%

Up 10-20%

10%

Up more than 20%

2%

Distribution

Percentage of shippers spending over $1M by mode Rail

Canadian shippers expecting to increase use of modes Rail

Intermodal

24% 17%

Air cargo Marine

6% 48%

21% Courier

of respondents

13% 29%

Private fleet

©iStock

For-Hire Truckload

25%

26%

of respondents

TL

36%

LTL

34%

Private fleet

16%

Courier

22%

Marine

35%

Air cargo

13%

Intermodal

31%

For-Hire LTL

www.canadianshipper.com

November 2018

33

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“Honey, I shrunk the workforce.”

A gig economy is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements. The trend toward a gig economy has begun: a study by Intuit predicted that by 2020, 40 per cent of American workers would be independent contractors. (www.WhatIs.com)

By Carolina Billings, CPCC, CHRL, MA-IS

related expenses and have opted in for a more fluid, bite-sized lifestyle, including becoming freelancers.

As with everything, there is good and bad. As it relates to employment from a leadership perspective, it offers benefits and challenges.

Benefits: • Ability to acquire skills needed

we’re down to hiring freelancers. How do

without having to increase fixed headcount and all related expenses.

• Keep cost of real state low. Many large corporations now use a concierge system for workstations.

you even begin to manage an ever-chang-

• Higher utilization of resources.

Q: First there was a push in my organization to not hire full-time, but only hire part-time or contract workers. Now we seem to have taken it a step even further—

ing support team?

To say that the workplace landscaping is changing is an understatement.

The competitive nature of commerce is now on steroids. I truly believe this is driven not by greed, but by evolution.

For many decades we were on a bit of a conveyor belt when it came to employment. We went to university to get an education in order to land a job at a corporation. We started at the bottom and worked our way up the corporate ladder: from the mail room to the boardroom. It was not uncommon to have one, two or perhaps only three jobs in our entire professional career.

Our global economy, technology and changing generations within the workplace have changed all that. Organizations are under constant pressure to stay competitive, invest in the latest technology, and deal with a new generation of employees that know from day one that their current job is a stepping stone. For them the average job tenure is two or three years maximum.

Welcome to the gig economy. It is disrupting many industries and concepts from full time employment to car ownership to the hospitality industry: think Airbnb. I have known many people who have happily given up their full time employment, car ownership and A:

©iStock

Landscapers are self-employed the quality and capacity of output may at times be higher than full time employees as their ability to stay competitive and keep their customers happy is vital for survival.

and objectives. Often times, managing gig workers resembles a more “project management flow chart” than an “organizational chart,” where it is more about the objective than human resources management.

Professionals with the right skills have lucrative freelance options, according to a recent FitSmallBusiness. com study. Their research revealed the 10 disciplines with the highest hourly wage ($USD) in 2018—and the job growth to match.

1.

Artificial Intelligence/ Deep Learning — $115.06/hour

2.

Blockchain Architecture — $87.05/hour

3.

Robotics — $77.46/hour

4.

Ethical Hacking — $66.33/hour

5.

Cryptocurrency — $65.37/hour

Challenges: • More pressure on management to

ensure quality of freelancers is consistent through freelancing resources.

• Lack of control. A freelancer may terminate a relationship with difficult clients or they- may in turn hire other freelancers to support their contract with you. The latter raises issues such as confidentiality and protection of intellectual property.

• Culture and collaboration. It is sometimes difficult to build a cohesive company culture that fosters collaboration within a virtual workspace.

Managing a virtual team requires the right resources for it to be successful.

An upfront investment in the right technology, proper legal contracts that include restrictive covenants and ensure proper compliance with Revenue Canada as to the status of a freelancer versus employee status, are just a few things to consider. Also, proper training of the management and leadership teams that will be responsible for meeting the goals

6.

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Carolina M. Billings is Partner & CEO of a business consulting group and has 15+ years of experience in the fields of Business Development & Branding, a Resources and Finance.

She champions leadership initiatives as well as empowering and coaching/mentoring others to lead. For more information please visit www.thewellnessgroup.ca or email Carolina@thewellnessgroup.ca www.canadianshipper.com

November 2018

35

REPRESENTING CANADIAN SHIPPERS FOR 100 YEARS What do you know about?

• The new Electronic Logging Device regulations for trucks?

• The container decontamination requirements?

• Improvements to the rail shipper protection laws?

FMA members are kept informed on changes to current laws and regulations that will impact their operations. Government relations and information dissemination is an essential part of FMA’s mandate to promote a cost-effective, safe and efficient transportation system.

GOVERNMENT HAS A BIG IMPACT ON FREIGHT TRANSPORTATION you can help shape the future of the freight transportation industry.

FOR MORE INFORMATION CONTACT FMA: (613) 599-3283 | kelsey@fma-agf.ca | www.fma-agf.ca

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www.canadianshipper.com November 2018 37

THE BIGGER PICTURE

Ten years after

th

By Dan Goodwill

ANNIVERSARY

The Surface Transportation Summit celebrated its 10th anniversary at the International Centre in October and the event addressed the profound changes that have taken hold of the transportation industry in 2018 and where they will likely lead us in 2019.

Paul Ferley, assistant chief economist, Royal Bank of Canada, kicked off the day by highlighting that the U.S. economy is operating beyond capacity. The U.S. is stimulating an already hot economy with tax cuts and low interest rates. As we look ahead to 2019, he noted that the level of future growth will depend on the actions of economic policymakers.

Rising oil prices, still accommodative monetary policy and strong U.S. growth have moved the Canadian economy to capacity. The new USMCA ( formerly NAFTA) trade agreement has created stability although with tariffs on steel and aluminum, and a president who can act erratically, this could change at any time.

The U.S. Federal Reserve’s objectives will likely be to try to moderate the level of activity. The concern is that the President will try to boost an economy that is already over capacity. In Canada, a low dollar coupled with rising oil prices and ongoing increases in interest rates by the Government of Canada are expected to moderate growth.

Steven Laskowski, presi-

dent, Ontario SURFACE TRANSPORTATION SUMMIT Trucking Association and Candian Trucking Alliance, highlighted the Trucks don’t come worldwide rise of nationalwith drivers ism. He specifically identiDavid Ross, research managfied that in the USMCA, ing director, global transporthere is now a cap on Canatation and logistics, Stifel dian exports of auto parts Financial, then addressed to the United States. the U.S. market. He pointed The strong economy has out that the truckload sector exposed a human resource represents 70 per cent of the problem in the transportaU.S. transportation industry. tion industry, namely the He observed that small fleets well publicized shortage of are growing more quickly drivers and mechanics. than large fleets. He menLaskowski says the Cationed that while truck fleets nadian government needs are growing, “they don’t to rethink its immigration come with drivers.” Ross policies. Over the past destated that for large fleets, cade, the objective of the five to 10 per cent of their policy has been to bring in fleets are parked because people with strong skills they cannot find enough and academic credentials to qualified drivers. bolster Canada’s workforce.

On the other hand, trucks It is becoming increasare getting safer and more ingly difficult to attract energy efficient. Some new people to become longhaul trucks are achieving nine drivers. Laskowski noted miles to the gallon. He also that Texas and California spoke about the shift in the are the top two states for age of truck drivers. The avlonghaul trucking out of erage age of drivers has been Toronto. Young people are moving progressively higher not interested in sleeping over the last few years. Forty in their trucks or in motels per cent of drivers in the U.S. or being away for extended are now over 50 years of age. periods of time. In the Ross reviewed a list of the short term, the governfactors reducing and inment must do more to encreasing truck capacity in courage immigrants to the U.S. While there are come to Canada to persome countervailing forces, form these jobs. the net impact of ELDs, HOS

38 November 2018 www.canadianshipper.com

changes, CSA, etc. have more than offset the positive capacity forces (i.e. miniaturization, LCVs).

The spike in freight rates has been well documented.

Ross identified the recent softening in rates in the spot market as shippers move to contract rates or dedicated fleets. Looking ahead to 2019, strong demand will still be met with a driver shortage that will continue to put upward pressure on freight rates. The more moderate growth in 2019 will probably result in rate increases in the high single digits versus the double digits of 2018.

He concluded his remarks with some suggestions on what shippers can do to address these powerful forces. He suggested they take a second look at the their supply chain. This includes packaging improvements, possible modal changes, longer contracts, guaranteed volumes, wider delivery windows, and even offering amenities for company drivers, all of which make a difference. He stressed that “collaboration is key.” This should include providing better data-sharing and partnering with carriers/3PLs but also potentially with other shippers as well. CS

Dan Goodwill, president of Dan Goodwill and Associates, has more than 30 years of experience in the logistics and transportation industries in both Canada and the US. Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. He has held several executive level positions in the industry. He can be reached at dan@dantranscon.com.

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